Innovating a Way Out of Supply Chain Constraints
EDNILSON BERNARDES , PH . D .
How do a few firms in the same industry get through a devastating global crisis comparatively better ? The pandemic is in its second year , and a new , aggressive geopolitical event is shocking global supply networks still in recovery mode . With 94 % of Fortune 1000 companies and small and medium-sized enterprises ( SMEs ) alike experiencing disruptions , many see supply chains broken and lacking resilience . However , there is light at the end of the tunnel in the form of digital innovation and an entrepreneurial mindset .
Supply network design considers regional specialization , labor costs , market access , natural resources and economies of scale and often involves thousands of globally interconnected firms . However , their interconnected nature makes the system vulnerable to shocks or constraints in any of its parts , as we are currently experiencing .
Nevertheless , the current constraints provide valuable lessons . Digital innovation can assist organizations in understanding and strengthening supply networks and their operations and implementing some of the learnings .
The global crisis exposed the dependence on single suppliers in specific regions , raising the need to produce closer to home . While such is necessary at some level , it is insufficient . Organizations also need to diversify sources . For instance , a series of recent factory fires in the U . S . caused widespread supply disruption . Resilinc ’ s EventWatch monitoring sent out 1,946 factory fire alerts in 2021 , increasing 129 % year over year . Also , bringing certain value chain stages back is neither easy nor cheap .
Nonetheless , digital capabilities make it possible to operate in places not traditionally considered . In addition , the flexibility of digital supply networks and processes can make it easier and faster for an organization to change plans quickly .
Another aspect that became clear during the pandemic was the lack of visibility into the supply network system . Most companies see their tier one suppliers — their direct and immediate source . However , often they have no visibility into tiers deep into their networks . Over 70 % of procurement professionals revealed to Reuters last year concerns about their
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